1. Management Summary

The following pages present the highlights of the findings of this study. Complete values for each graphic will be found in the Details section of this report. You can download a complete copy of this study.

Merchandise and/ or Travel Usage and Estimated $$ Value

Thirty-two percent (32%) of the respondents currently use merchandise and/ or travel to motivate consumers, company salespeople, dealers, distributors and non-sales employees, up from 26% in the 1996 survey.

1996

2000

Change

Use

26%

32%

+6%

Do Not Use

74%

68%

-6%

The highest percentage of usage occurs in the organizations with the greatest number of employees (e.g., 100 – 999 employees and 1,000 + employees). However, according to Dun & Bradstreet (see Tables 13a and 13b in the Details section), these companies account for only 1.8% of the total universe of businesses.

[Details, Tables 1a & 1b]

Of the 32 percent using merchandise or travel incentives, 64 percent of the respondent organizations use merchandise and/ or travel as Sales/ Incentives for sales management and internal/ outside sales forces, dealer and distributor personnel and independent sales representatives.

Note: “Business Gifts” was added as a separate category in the 2000 survey.

[Details, Tables 2a & 2b]

The estimated total 2000 expenditure for merchandise and travel items used for motivational purposes is $26.9 billion. This is based on this survey and Dun & Bradstreet database estimates.

The estimated expenditure by type of incentive is shown in the table below. “Business Gifts” may include some of the expenditures that were recorded in the “Dealer Merchandise and Dealer Travel” categories in the previous survey.

Usage of and Opinions about Selected Motivations

Sixty-nine percent (69%) of the respondents use cash awards to motivate consumers/ users, salespeople, dealers, distributors or non-sales employees, compared to 63% of the respondents in the 1996 study. However, usage of other non-cash awards also increased versus 1996, suggesting that respondents are using a more varied mix of motivations.

[Details, Tables 6a & 6b]

“Cash Awards” was rated most effective, on an index rating, in reaching both marketing and sales goals and personnel goals. “Time Off from Job” and “Cash Awards” were rated most effective in reaching non-sales personnel goals.

The index rating is based upon the respondents’ indication of how effective they have found each of the items. The effectiveness ratings are Extremely, Very, Fairly, Somewhat, Not Very and Not At All [Details, Tables 7a & 7b].

2. Conclusions

The survey recently conducted among executives shows that the usage of merchandise and/ or travel as incentives has increased slightly since the last survey conducted in 1996. Despite this increase, approximately 2 out of 3 companies still are not using merchandise and/ or travel as incentives. This suggests a considerable untapped opportunity for companies who supply products or services that are used as incentives.

According to the companies who do not use incentives, the biggest obstacle by far is a concern about the cost of an incentive program. To overcome this concern, suppliers of incentives must offer incentives that represent a good value for the expenditure. In addition, suppliers of incentives should be ready to demonstrate how incentive programs deliver tangible results and achieve their objectives. To make a convincing case, testimonials about successful incentive programs could be very persuasive to non-users of incentives, especially if these testimonials are from companies in non-users’ respective industries.

For suppliers of incentives, a good opportunity for increasing volume may be in companies and industries where usage of motivational items as incentives is underdeveloped versus the average. According to this survey, companies with fewer than 99 employees and the Distribution, Retail, and Services industries are relatively underdeveloped with respect to usage of incentive programs.

Another opportunity can be to focus on companies who plan to increase their expenditure for motivational items in the future. About 1 in 3 companies who participated in this survey plan to increase their expenditure for motivational items in 2001. However, the planned increases are not uniform across all company sizes or industry groups. Based on survey participants’ responses, suppliers of incentives should consider focusing on the Financial/ Transportation and Manufacturing industries because these groups plan to increase their spending on motivational items in 2001.

Replacing cash as an incentive is another opportunity for suppliers. Cash continues to be a popular incentive, with about 7 out of 10 companies using cash in the most recent survey. To offset the appeal of cash as an incentive, suppliers of incentives need to make a convincing case that demonstrates the effectiveness of non-cash incentives. Relevant testimonials or case studies, if available, can make a compelling argument in support of non-cash incentives. The Retail industry might offer a specific opportunity since the Retail industry is over-developed in terms of using cash as an incentive and is under-developed with respect to using non-cash incentives.

The use of the Internet is a new area explored in the 2000 survey. The Internet can be both a threat and an opportunity for suppliers of incentives. As shown in the Summary and Details sections, about 1 in 6 companies used the Internet for motivational programs in 2000. Since a primary reason for using the Internet was to source vendors or suppliers of motivational items, suppliers of incentives should be sure to have a presence on the Internet via a Web site. In addition, their company name should appear when Internet users use a search engine to find incentive suppliers.

Another Internet-related opportunity for suppliers could be to promote the use of incentives to build Web site traffic. According to this survey, 83 percent of the companies have a Web site but only 16 percent of these companies use incentives to build traffic to their Web site. Suppliers of incentives may wish to focus on educating non-users of incentives about the value of using incentives to build Web site traffic.

From this report writer’s experiences outside of this project, it is apparent that many companies desire to increase their use of the Internet, for both business building and business efficiency reasons. However, the companies do not know how to drive customers and potential customers to their site – an area that falls squarely into the world of incentive programs.

3. Methodology

In 1999, the Incentive Federation requested that the Center for Concept Development conduct focus groups with incentive users in the New York, Los Angeles, Dallas, Chicago, and Atlanta areas. The purpose of this qualitative research was to identify issues regarding the following:

The level of awareness (usage) of incentives by corporate America;

Usage levels of the various types of incentives;

Industry breakout of user organization;

Delineation by type of incentive used;

Degree of involvement by corporate management/ officers in incentive program planning;

Usage of the Internet for incentives;

Sources of information relating to incentives; and

Indications regarding effectiveness of incentives.

In 2000, the Incentive Federation requested that the Center for Concept Development execute the second, quantitative, phase of this research. This research consisted of a mail questionnaire sent to 8,000 executives in a cross section of American enterprises on a national basis. The questionnaire, designed by Ralph Head & Associates, was sent with a $1.00 bill and a postage-free return envelope and reflected issues that were learned in the focus groups conducted among incentive users in 1999. A test mailing of 1,000 was made to ensure that the desired results would be obtained. Once it was determined that the desired results would be obtained the full mailing was made.

The mailing was sent to Sales, Marketing and Human Resource executives in organizations where such titles existed. In others it was sent to the ranking individual (President, owner, etc.), but in all cases it was sent to an individual and not just a company name. The names were provided by Dun & Bradstreet.

Of the 8,000 questionnaires mailed out, 315 were returned as non-deliverable resulting in a net mailing of 7,685. When the mailing was closed for tabulation on November 18, 2000, 808 useable returns had been received. Subsequent to the close 27 additional questionnaires have been received bringing the total return to 835.